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Tax competition in the presence of environmental spillovers

Author

Listed:
  • Fabio Antoniou

    (Athens University of Economics and Business)

  • Panos Hatzipanayotou

    (Athens University of Economics and Business
    CES-ifo (Center of Economic Studies-ifo Institute))

  • Michael S. Michael

    (CES-ifo (Center of Economic Studies-ifo Institute)
    University of Cyprus)

  • Nikos Tsakiris

    (University of Ioannina)

Abstract

This paper examines the efficiency of destination-and origin-based consumption taxes, in the presence of consumption generated perfect cross-border pollution spillovers, when tax revenue either finances public pollution abatement or it is lump-sum distributed. When consumption tax revenue finances the provision of public pollution abatement and regions have identical and quasi-linear preferences then, the non-cooperative equilibrium origin-based consumption taxes are efficient, while the destination-based consumption taxes are inefficiently low. When, however, consumption tax revenue is lump-sum distributed, then, the destination-based tax principle leads to inefficiently low taxes, while the origin-based tax principle leads either to inefficiently high or low taxes.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:3:d:10.1007_s10797-021-09680-3
    DOI: 10.1007/s10797-021-09680-3
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    More about this item

    Keywords

    Environmental spillovers; Efficiency; Tax competition; Tax principles;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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